Written by Katie Gomez

August is a universal vacation month, especially in Europe. As a result, traders often see a dip in market volume and liquidity. The more people on vacation, the less active the market becomes, creating a ripple effect that affects trades globally. Therefore, it’s crucial to decide how to handle your vacation, whether you’re planning one for this month or the next year.

How you prepare financially for your vacation will depend on various factors: your circumstances, risk tolerance, and specific investment goals. This article reviews some considerations and options to keep in mind before entering “vacation mode.” Whether you’re a day trader, swing trader, position trader, or investor, transitioning from an active trading mindset to vacation mode can be challenging.

Options for Traders on Vacation

Firstly, are you willing to continue trading while on vacation? If so, the following might not apply to you. However, if you’re planning to disconnect and truly take a break, you have several options to consider.

1. Sell All Positions: One option is to cash out entirely. Although this might be difficult for many traders emotionally, in the current market state, it’s not the craziest idea. This approach allows you to fully disconnect and focus on your vacation, free from the temptation to check the markets.
2. Partial Selling: A more common strategy is to sell some—but not all—of your investments. This strategy balances the need to stay connected with the market while freeing up cash and reducing exposure to market risks during your absence.
3. Long-Term Focus: If you’re a long-term investor who doesn’t want to sell, consider trading before leaving. However, be mindful of potential transaction costs and tax implications.
4. Use Stop-Loss Orders: Given potential market volatility during your absence, consider setting up stop-loss orders on your investments. This approach provides a safety net, triggering sales if asset prices fall below predetermined levels.
5. Automated Investing: If you’re comfortable with AI, using an automated trading system or “robo-advisor” could act as your market watchdog, making investment decisions based on preset criteria.
6. Do Nothing: Some traders and investors might choose to maintain their current portfolio, hoping it remains stable during their absence.

Staying Connected

Though it’s challenging to disconnect 100% from the markets, staying informed via mobile devices or laptops isn’t unreasonable. Access to real-time data allows for adjustments in response to significant market movements even while you’re on vacation.

Conclusion

Whether you’re vacationing this month or staying put, it’s important to note that market conditions will change when a large portion of traders are away. To manage this transition successfully, identify your priorities, establish a timeframe, and create a secure plan to handle open positions. If you’re new to trading and need guidance for this transitional period, consult a professional financial advisor.